SANTOS LIMITED (DEED OF UNDERTAKING) BILL

Second Reading

The Hon. P. HOLLOWAY (Minister for Police, Minister for Mineral Resources Development, Minister for Urban Development and Planning) (11:04): I move:

That this bill be now read a second time.

I seek leave to have the second reading report and explanation of clauses inserted in Hansard without my reading it.

Leave granted.

A 15 per cent shareholding restriction was placed on Santos Limited in 1979 to prevent a hostile takeover of Santos by Alan Bond. The basis for this original legislation was to secure the State's gas supplies in the Cooper Basin.

Significant developments have occurred in energy markets since the introduction of the 1979 Act. The Cooper Basin is now a mature asset and the State is no longer totally reliant on the Cooper Basin for its energy supplies with competing gas supplies now available from Victoria through the SEAGas pipeline and from Queensland through the gas hub at Moomba.

The 1979 Act was replaced in 1989 with the Santos Limited (Regulation of Shareholdings) Act 1989, which applies while Santos Limited produces petroleum in South Australia. Santos has matured significantly as a company since that time, it is now a global gas producer with projects throughout Australia and overseas. The Cooper Basin, while accounting for around 80 per cent of Santos' South Australian based staff, now only accounts for 23 per cent of Santos production and 17 per cent of its reserves.

Santos has substantially increased its corporate presence in South Australia over the years. This has been a commercial decision by the company as there are no restrictions in existing legislation which require Santos to maintain its head office in South Australia.

Santos Limited requested earlier this year that a formal review be undertaken into the Act on the basis that they believed the shareholding restriction was limiting their ability to grow.

A review was undertaken with the assistance of the Economic Development Board and consideration was given to the original intent of the legislation, the impact of the cap on the future growth of Santos, potential risks from the removal of the cap, energy security issues and regional development implications.

The review recommended the removal of the cap on the basis that the original basis for the introduction of the legislation in 1979 was no longer valid.

The Government has consistently stated that it would only consider the removal of the share cap if the State could be assured that it was in the interests of the people of South Australia.

As Members would be aware, Santos is an outstanding corporate citizen in South Australia investing millions in oil and gas exploration and production each year, employing well over a thousand people and providing substantial corporate sponsorship.

To reinforce Santos' ongoing commitment to the State they have provided a Deed of Undertaking in relation to their ongoing corporate presence in South Australia.

The Deed of Undertaking offered by Santos provides three fundamental commitments, these include:

Guarantees that effectively 90 per cent of the current South Australian-based roles stay here, which includes all of the roles at our major South Australian operational sites. This equates currently to approximately 1700 jobs in South Australia.

A Social Responsibility and Community Benefits fund of some $60 million over 10 years, to be applied to a range of sponsorships, including support for the Royal Institution, indigenous programs and educational scholarships; and

These commitments are supported by a $100 million legally enforceable compensation mechanism, should there be a significant reduction in corporate presence.

The shareholder cap will be removed 12 months after assent has been given to the passage of this Bill. This is at the request of Santos, which sought a period of orderly transition.

This is a good outcome for South Australia and for Santos, which ensures a continued strong corporate presence by Santos to South Australia and provides the company with the flexibility to grow and pursue new opportunities.

I commend the Bill to Members.

Explanation of Clauses

1—Short title

This clause is formal.

2—Commencement

The commencement of the measure is to operate in a manner consistent with clause 1 of the Deed. In particular, the Bill provides for the removal of the Share Cap to be effective 12 months from the date on which it receives assent as an Act. The removal will be effected by the repeal of the Santos Limited (Regulation of Shareholdings) Act 1989.

3—Interpretation

This clause provides for a definition of the Deed, being the Deed of Undertaking made by Santos Limited (ACN 007 550 923) in favour of the Premier for and on behalf of the Crown in right of the State of South Australia, as tabled in the House of Assembly.

4—Ratification and effect of Deed

The Bill provides for the Deed to be ratified and approved by the Parliament. The measure will also expressly provide that the Deed will have full force and effect and will ensure that it is binding and enforceable by virtue of the enactment of this law. The Deed will be enforceable by the Premier acting for and on behalf of the Crown in right of the State.

5—Effect of Act

This clause will ensure that the enactment of this measure does not in itself give rise to a termination of the Deed under clause 3.2(a)(2) of the Deed.

6—Evidence

This is an evidentiary provision.

7—Repeal

This clause provides for the repeal of the Santos Limited (Regulation of Shareholdings) Act 1989, subject to the operation of clause 2.

Debate adjourned on motion of Hon. D.W. Ridgway.